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Military Costs Under Review in Bid to Trim Waste

The Pentagon’s effort to cut more than $100 billion in administrative costs over the next several years is expected to take a new direction on Monday with proposals that could lower profits for military companies.

Industry officials said that Ashton B. Carter, the under secretary of defense for acquisition, had called a meeting with contractors and lobbyists to address ways to cut waste. In addition to trimming its own bureaucracy, the Pentagon is looking for savings in how it hands out hundreds of billions of dollars in contracts for weapons and services each year.

Mr. Carter is expected to question overhead costs built into many deals and the amount of profit on certain types of contracts, the industry officials said. Congressional auditors have long criticized the Pentagon for awarding too many contracts in which it covers all the costs and pays sizable fees even when companies have trouble performing.

At the major military companies, “everyone’s apprehensive” about the meeting, said Loren B. Thompson, the chief operating officer of the Lexington Institute, a research group financed in part by the contractors.

Cheryl Irwin, a Pentagon spokeswoman, said Sunday that Mr. Carter did not want to comment publicly in advance of the meeting.

The meeting stems from a larger push by the defense secretary, Robert M. Gates, to free up money for troops in the field. But any efforts to cut costs involving contractors could signal a downturn for the industry, which has had record profits since military spending soared after the 9/11 terrorist attacks.

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Even though Mr. Gates canceled a number of prominent weapons programs last year, the department’s budgets have continued to rise under President Obama, to $708 billion proposed for next year, including the costs of the Iraq and Afghanistan wars.

Mr. Gates has said he would like to see the Pentagon’s base budget, excluding the war costs, grow each year by 1 to 2 percent after inflation.

But health care and other personnel costs are taking up a rising share of the total, and many analysts doubt that the government will be able to sustain such increases as the nation’s overall budget deficits expand.

Mr. Thompson, who is also a consultant to several military companies, said he believed that Mr. Carter wanted to get the industry’s reaction before deciding on some the contracting changes.

Congressional auditors have especially criticized many of the contracts for supplies and services in the war zones as being poorly drawn by the government.

They also have questioned whether the Pentagon’s contracting officers have the skills and the experience to ride herd on some of the contractors. The Pentagon sharply reduced its contracting staff during the 1990s, and the Obama administration is hiring 20,000 more people.

A version of this article appears in print on June 28, 2010, on Page B2 of the New York edition with the headline: Military Costs Under Review in Bid to Trim Waste. Order Reprints|Today's Paper|Subscribe